Transfection of CV-1 cells with DNA from frame shift mutant C1-5, a 2 base insertion at the unique HpaII site within the SV40 agnogene, produced plaques signficantly smaller and less efficiently than wild-type DNA. Because the kinetics of plaque formation suggested that second-site mutations may arise, we analyzed cloned DNA isolated from individual plaques. DNA sequence analysis revealed a high frequency of deletions mapping within the SV40 late leader sequences. These deletion mutants were viable and grew more efficiently than parental mutant C1-5, but less efficiently than wild-type SV40. Although the deletions varied in size and location, we found no correlation between their growth characteristics and their altered DNA sequences (e.g., potential to encode a truncated agnoprotein). The observations suggest that the secondary structure of the RNA transcripts, as determined by the sequence of mutants in this region, may play an important role in SV40 late gene expression.